British Airways faces claims deluge over payout for axed flights

Cash back: Thousands more BA passengers could make similar claims after being left stranded in February by an industrial dispute

British Airways is facing a possible multi-million-pound bill after agreeing to compensate two passengers for cancelled flights.

Now thousands more BA passengers could make similar claims after being left stranded in February by an industrial dispute. Initially BA rejected compensation claims arguing a clause in EU regulations meant it did not have to pay compensation.

But after long negotiation it agreed to the payout and to meet legal costs for two passengers stranded in Cape Town during the dispute with cabin crew.

The airline tried to keep the offer secret to prevent others making similar claims by insisting the passengers and claims handling company signed a confidentiality agreement.

But Dutch compensation company EUclaim refused to sign the agreement and has told BA it will be applying for the case to be held in court.

It also said it had been contacted by 400 other passengers and travel agents who were all seeking compensation. BA is thought to be anxious to avoid a hearing in case a precedent is established which would leave airlines vulnerable to claims.

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In a letter from BA to EUclaim, the airline wrote: "Although the cancellation of BA42 on 2 February 2007 was due to extraordinary circumstances and as such compensation would not be payable, on this occasion BA may not choose to prove the defence in court if an amicable settlement can be reached."

Hendrick Noorderhaven, chief executive of EUclaims, said: "We have refused to be silenced. We want this case to go to court to establish a clear ruling which will save passengers from having to spend a great deal of time fighting their cases."

In February BA cancelled 1,200 flights five days before the strikes were due to take place. The stoppages were called off but it came too late for all the flights to be reinstated.

Many of the planes that did operate were almost empty because passengers had been forced to change their plans. The news could also put airline unions in a stronger position, knowing strikes cost the airlines not only lost revenue but also massive compensation bills.

A spokesman for Unite, the union which represents most of BA cabin crew, said EUclaims' case would force airlines to work harder to reach an agreement in disputes.

He said: "Anything which makes an airline realise there are serious consequences to its decisions will help resolve disputes more easily."

A BA spokesman said that it had made the offer to EUclaim without admitting liability. Mr Noorderhaven said BA had been wrong to invoke the EU clause because it was not designed to protect airlines who pushed disputes to the limit in order to extract the best deal from unions.

He said: "Passengers were the victims of a plan by Willie Walsh [the BA chief executive] to save £50 million in cabin crew costs and therefore generate more profit for shareholders. If people are stranded because an airline fails to resolve a dispute in time with its cabin crew, they deserve to be compensated."